The Worrisome Aspect of Google's Mobile Ad Strategy

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Oct. 18 (Bloomberg) –- Bloomberg Contributing Editor Paul Kedrosky discusses Google's mobile ad strategy with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Large.

I want to bring back bloomberg contributing editor, altered jeske -- paul kedrosky.

You are kind of the glass half empty kind of guy, aren't you?

I'm more of a -- kind of guy.

[laughter] it is sort of a mixed bag.

I think the two main ones are the -- i think the sneaky issue inside of the results and the one that troubles me a little bit is that i think there is a real opportunity for google to increase its click through in the face of declining costs by really degrading the user experience and mobile.

You see that increasingly if you search for many things inside the google app on an iphone or an android, you will see in the top third of the screen will be ads.

They look very much so like organic results than they might on the desktop.

What you are seeing here is google playing with what you can do to make sure that it gets those ads on mobile.

What is worrisome is that it degrades the user experience.

You're seeing ads take up a fraction of the suit -- screen.

The reason why the click rate is improving is because people are confusing bad results in many cases for organic search results.

There is the opportunity for mischief in here.

I thought with respect to this changing behavior of ad placement on mobile that there was some decline happening in parts of the business.

Clearly in desktop, there is some.

There is some opportunity to continue to do it, but you cannot do much more than what they have done.

You cannot take up the whole screen a mobile with ads.

It does not work.

It would destroy the user experience.

And yet, even if the user experience is being degraded, you put it out that it is getting close to apple's market cap.

Yeah, it is.

One of the things a number of people have pointed out is that it attracts investors.

If you look at that cap equity growth, google is one of the few that actually sported a relatively attractive evaluation on top of a growth rate in the marketplace that was not being commoditized.

What you saw is a little bit of a relief rally.

People said, you know what?

I know lots of things are in trouble with mega-cap growth technology, but it is not affecting the company right now or at least not in the evaluation.

There is release rusher coming in.

The longer-term story you alluded to is that there is an opportunity for this to come close in terms of market value to apple.

The underlying story is that they are cutting a pretty wide swath in the marketplace.

My expectation is within two years, these two companies market caps will be the same.

It will be partly apple coming back.

Could google surpass apple?

Yeah.

No more than two or three years out.

And this would be a triumph of google's mobile strategy over apple?

Absolutely.

It is this problem of the structural problem that apple has.

Yes, historically it has -- when growth is lower and two they are seen as a hardware company.

They are seen as not hardware dependent.

They attract a premium evaluation.

This text has been automatically generated. It may not be 100% accurate.

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